Well coded SKU’s can save your business alot of money.
When we integrate with other systems we get excited when we get well coded SKU’s because it allows us to make really well functioning product websites. The time saving comes in.
- automating product import , categorization, attribute sizing.
- automated image to product assignment
- automated product associations and links
These 3 automated items above usually account for over 70% of the effort in a product site on the client side if the SKU’s are random or badly formed with special characters embedded.
1. Define the Purpose of Your SKU System
Before designing the format, explicitly document what the SKU must support.
Typical objectives:
- Product identification at a glance
- Inventory management and replenishment
- Variant differentiation (size, strength, color, pack size, etc.)
- Reporting and analytics
- System interoperability (ERP, WMS, POS, ecommerce)
- Human readability vs. machine efficiency
- Clarify who uses the SKU (warehouse staff, customer service, suppliers, systems) and how often humans must interpret it.
2. Establish Core Design Principles
A well-designed SKU system should be:
- a. Scalable
- Supports future categories, variants, and geographies
- Avoids hard-coded assumptions (e.g., max 9 colors)
- b. Consistent
- Same structure across all products
- Same attribute order across all categories (where possible)
- c. Stable
- SKUs should never change once issued
- Product attribute updates should not require SKU changes
d. Compact but Meaningful
Encodes key differentiators
Avoids excessive verbosity that causes errors
e. System-Friendly
Uppercase alphanumeric
No spaces or special characters ( hyphen and underscore are valid )
Fixed or predictable segment lengths
3. Decide: Intelligent vs. Non-Intelligent SKUs
Intelligent (Structured) SKUs
Contain encoded meaning.
Pros
Human-readable
Faster manual identification
Useful in operational contexts
Cons
- Harder to maintain
- Risk of running out of codes
- Changes in business logic can break structure
- Non-Intelligent (Sequential) SKUs
- Random or sequential identifiers.
- Requires system lookup for meaning
Pros
- Extremely scalable
- No maintenance burden
- Ideal for large catalogs
Best practice:
Use semi-intelligent SKUs—encode only high-value, stable attributes and manage everything else via metadata.
4. Define SKU Structure (Segmented Approach)
Use fixed segments separated by a delimiter (e.g., -).
Example structure:
| Segment | Purpose | Example |
|---|---|---|
| Category | High-level product class | MED, APP, ELEC |
| Brand / Manufacturer | Optional | PFZ, NKE |
| Core Product | Unique product family | AMOX, TSHRT |
| Variant | Key differentiator | 500MG, RED, L |
| Pack / Unit | Quantity or packaging | 30CT, BOX |
CAT-BRAND-CORE-VAR-PACK
Example SKU:
MED-PFZ-AMOX-500MG-30CT
5. Choose Which Attributes to Encode
Only encode attributes that are:
- Operationally critical
- Finite and well-controlled
- Unlikely to change
- Good Candidates
- Size / strength
- Color
- Pack quantity
- Form factor
Poor Candidates
- Price
- Supplier
- Regulatory status
- Marketing labels
- Seasonal flags
These belong in product attributes, not the SKU.
6. Standardize Attribute Codes
Create controlled vocabularies for each segment.
Examples:
Colors
BLK = Black
WHT = White
RED = Red
Sizes
XS, S, M, L, XL
28W, 32W
Strength
250MG, 5ML, 10IU
Maintain a SKU Code Dictionary that is versioned and centrally governed.
7. Plan for Growth and Exceptions
Reserve Code Space
- Use numeric padding (e.g., 001–999)
- Avoid single-character limits
- Category Overrides
- Some categories need extra segments.
Example:
MED-RX-AMOX-500MG-CAP-30CT
Implement rules like:
- Core structure is fixed
- Optional segments allowed per category
- Order never changes
8. Enforce Governance and Automation
Governance
- Central SKU authority (team or system)
- Formal SKU creation rules
- SKU approval workflow
- Automation
- Auto-generate SKUs from attribute selections
- Validate against dictionaries
- Prevent duplicates at creation time
- Avoid manual SKU entry whenever possible.
9. Document the SKU System
Your documentation should include:
- SKU format definition
- Segment meanings
- Allowed values per segment
- Examples per category
- Rules for new category onboarding
- Deprecation policy (never reuse SKUs)
- This documentation is as important as the SKU itself.
10. Common Mistakes to Avoid
- Encoding too much meaning
- Reusing retired SKUs
- Letting vendors define SKU logic
- Mixing delimiters or casing
- Changing SKU structure midstream
- Using SKUs as marketing tools
- Using SKU to game SEO
11. Example: Scalable SKU Template
Template
| Segment | Meaning |
|---|---|
| CCC | Category |
| PPP | Product family |
| VVVV | Variant |
| AAA | Attribute (optional) |
| BBB | Pack/unit |
Example
APP-TSHRT-BASIC-BLU-M
12. Final Recommendation
Design your SKU system as infrastructure, not labeling.
Optimize for:
- Longevity over cleverness
- Governance over flexibility
- Metadata over over-encoding